Iraqi development fund at $180 billion
A report from the United Nations secretary general said the amount of capital deposited in the UN’s Development Fund for Iraq, as of the end of 2008, was some $180 billion. The fund, created after the UN halted its oil-for-food program in 2003, acquires most of its revenue from Iraqi hydrocarbon exports, accounting for some $165 billion of the fund’s total capital.
A further $10.4 billion was deposited into the fund from the balance of the oil-for food program, and $1.5 billion came from the proceeds of frozen assets. The fund is managed by the International Advisory Board (IAB), which is comprised of members from the UN, the International Monetary Fund, the director general of the Arab Fund for Social and Economic Development, the World Bank and the Iraqi government.
The IAB and the UN secretary general have declared the Committee of Financial Experts, created by the Iraqi Council of Ministers, ready to assume oversight of the account. The report also cited “key issues of concern regarding weaknesses in controls over oil extraction and use of the resources,” and said “the International Advisory and Monitoring Board remains concerned that one of its earliest recommendations from 2004 concerning oil metering remains incomplete.”
The report notes that the fund’s external auditor, KPMG, stated total metering systems installed up until the end of 2008 had only reached 33 percent. Nevertheless, the report claimed that the auditor was able to reconcile petroleum quantities received by Iraq’s State Oil Marketing Organization (SOMO) with sales from the country’s petroleum exports.
Equity firm sales jump in the Gulf
A recent report released by Lipper, a Thomson Reuters research company, stated that the number of equity firms in the Gulf Cooperation Council that are registered for sale grew by 21 percent this year, compared with a 12.55 percent loss during the same period last year. The report stated that during the second quarter of 2009, GCC equity funds posted a 30 percent increase in average returns, compared to the second quarter of 2008.
“GCC markets outperformed developed markets but underperformed other emerging markets,” said Dunny Moonesawmy, Lipper’s head of research for the Middle East. “News at the corporate level, the disclosures of payment defaults by Saad Group and Ahmad Hamad Al Gosaibi & Bros, and at the macro-economic level, confirmation of a lighter GCC monetary council, contributed to accrued uncertainties in the market.”
As far as asset classes are concerned, equity led the pack with a near 10 percent gain over the first half of 2009, due mainly to the results of the Emerging Markets Global and Emerging Markets Asia funds, both of which increased by 40 percent, according to Lipper.
“The market should stabilize itself with the acceleration of government spending programs, which should benefit the whole region,” Moonesawmy concluded in the report.
Dubai debt increases
Dubai’s measureable public debt continued to mount last month, according to the Cairo-based investment bank EFG Hermes. But the total amount of Dubai’s public debt remains uncertain due to a lack of transparency in several Dubai companies such as Limitless and Istithmar.
Estimates of Dubai’s debt have been as high as $160 billion, although these remain unconfirmed.
The bank estimates that the total debt of the emirate amounted to $87.4 billion last month, up from a previous estimate of $80 billion. A total of $60 billion in debt is estimated to be held by the government-owned conglomerate Dubai World.
Nakheel, which is also government owned, revealed Dubai World’s liabilities as part of its mandatory disclosure obligations attached to a $3.5 billion Sukuk, due to expire in December. Nakheel itself already owes $1 billion to creditors, according to EFG Hermes.
“The fact that the government is not sending a message of unambiguous support for Nakheel raises doubt in the market regarding the extent to which the government will relieve investors of the substantial refinancing risks of Dubai Inc. generally,” said Farouk Soussa, an analyst with ratings agency Standard & Poors, to the Wall Street Journal.
UAE spreads the wealth in 2008
The total amount of investment by the United Arab Emirates into fellow Arab League member states totaled approximately $10.7 billion last year, according to the Kuwaiti-based Inter-Arab Investment Guarantee Corporation (IAIGC). The figure places the UAE atop the list of capital exporters to other Arab League members.
According to the IAIGC’s figures released last month, the UAE has injected $5.8 billion into Saudi Arabia, making it the largest contributor of foreign direct investment in the kingdom. In the wake of the global downturn, the Saudi economy is seen as one of the more stable and reliable economies in the region because of its conservative fiscal policy and large hydrocarbon reserves.
The figure dwarfs other investments made by the UAE in other Arab countries, and constituted almost 45 percent of total investments made in the Saudi kingdom by other members of the Arab League, which came to around $12.9 billion. The UAE also invested a total of almost $34 billion in other Arab League member states, accounting for more than one-third of all foreign direct investments regionally.
In terms of the value of licenses granted by the Saudi Arabian General Investment Authority, the government institution responsible for managing investment and economic liberalization in the country, the UAE again came out on top with $32.84 billion dollars already committed, which is around 40 percent of all licenses approved by the authority since it came into force more than nine years ago.
Yahoo! buys Maktoob
In a bid to weaken the global Internet search-engine leader Google, the alliance between tech giants Yahoo! and Microsoft made its first foray into the Middle East. Last month Yahoo acquired the Jordan-based Arabic Internet portal Maktoob. The specific terms of the agreement were not publicized at a press conference in Dubai where the announcement was made. But several sources have put Maktoob’s price tag at $70 million to $85 million. The deal will provide Yahoo with its first portal dedicated to the Arab world and allow it to take advantage of Maktoob’s more than 16.5 million unique users.
The deal, however, does not include several of Maktoob’s products, such as their auction site Souq and their prepaid card payment system CashU, which will become part of the Jabbar Internet Group.
“Maktoob is a terrific local brand,” said Yahoo’s Senior Vice President and Head of Emerging Markets, Keith Nilsson, at the press conference where the deal was announced. “Yahoo will be combining its global technology and Maktoob’s local Arabic content.”
A substantial share of the company was previously acquired by the Dubai-based private equity company, Abraaj Capital, which sold its share to the American Tiger Global Management, which will now go to Yahoo.
“Yahoo and Maktoob are natural partners and this combination should help energize the Internet market in the region as a whole,” stated Samih Toukan, founder of Maktoob in a press release issued by Yahoo. “We are excited about Yahoo building a stronger presence in the Middle East and bringing its compelling suite of services to Arab users in Arabic.”
The deal comes on the heels of an expected increase in regional online advertising, which is projected to grow by 35 to 40 percent this year according to Madar Research.
Saudi Arabia deals well with low oil prices
The outlook for the region’s largest economy, Saudi Arabia, will “remain broadly positive” despite the ongoing economic downturn, according to an International Monetary Fund executive board report released last month. The IMF expects the Saudi Economy to contract by 0.9 percent this year, down from a 4.2 percent growth in 2008, because of lower oil prices. The Fund praised the kingdom for its leadership in stabilizing oil prices through increasing market supply despite falling oil prices.
According to the IMF, the amount of gross domestic product that is derived from oil revenue in the kingdom is expected to shrink by 10.3 percent, while the non-oil sector is predicted to expand by 3.3 percent due to an increase in government expenditure. The Saudi government has been keen to invest in infrastructure projects since the onset of the global downturn. Accordingly, the kingdom has pledged $127 billion for infrastructure this year, which represents a $18 billion increase on the amount spent in 2008. The report also stated that the Saudi banking industry “remains profitable and well-capitalized with low non-performing loans,” while noting that the Tadawul, the Saudi Stock Exchange, fell 46 percent in the last quarter of 2008.
